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Pearl Announces 2007 Capital Budget Program

CALGARY, ALBERTA--(CCNMatthews - Dec. 22, 2006) - Pearl Exploration and Production Ltd. ("Pearl" or the "Company") (TSX VENTURE:PXX) is pleased to report that the Board of Directors has approved a $145 million capital expenditures budget for 2007 (all figures in Canadian Dollars).

In addition, an associated $48 - 52 million operating and $7 million general and administrative expenses budget has been approved equivalent to an average $12.00 - 13.00/bbl operating expense and $1.50 - 1.75/bbl general and administrative expenses, respectively. A total of 230 wells are planned for 2007, and the Company forecasts gross production exit rates for 2007 in the range of 12,000 to 14,500 barrels of oil per day.

This budget and work program is focused on development projects ($130 million, 90%) with near term cashflow and net present value additions, along with potentially high impact exploration and exploitation projects ($15 million, 10%) which will add material value if successful.

The Company is investing in Onion Lake conventional heavy oil production (87.5% WI) to both appraise and develop reserves, with expectations for significant production gains in 2007. Pearl encountered regulatory delays to its planned Q4 2006 drilling program which has been postponed to January 2007. The Company is being actively assisted by its partner, the Onion Lake First Nations Band, in resolving the issues associated with regulatory delays.

There are several additional development projects that will be funded to develop production and reserves:

The Company has reserved additional contingent funds for these projects to accelerate further production additions which are dependent on weather, services availability and the timing of regulatory approvals.

The board has also authorized management to proceed with activities to rationalize non-core assets.

The Company also reports that it has granted incentive stock options to certain directors and officers of the Company. The options entitle such persons to purchase up to an aggregate of 1,377,000 common shares of Pearl at a price of $5.15 over a period of five years. The option grant is subject to all requisite regulatory approvals.

Pearl is a public company focused on delivering disciplined growth by establishing a North American portfolio of oil and gas projects with an emphasis on large resource opportunities. Additional information on Pearl is available on our website at www.pearleandp.com.

Forward-looking statements: This document contains statements about expected or anticipated future events and financial results that are forward-looking in nature and as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, the regulatory process and actions, technical issues, new legislation, competitive and general economic factors and conditions, the uncertainties resulting from potential delays or changes in plans, the occurrence of unexpected events, and the Company's capability to execute and implement its future plans. Actual results may differ materially from those projected by management. For such statements, we claim the safe harbour for forward-looking statements within the meaning of the Private Securities Legislation Reform Act of 1995.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.